Mortgage stress and precarious home ownership

Between 1987 and 2015, the growth in mortgage debt outstripped both house price and income growth among older mortgagors (55+). Mortgage debt blew out by 600 per cent while house prices tripled. Income growth lagged even further behind, doubling over the same period.

This report, funded by the Australian Housing and Urban Research Institute (AHURI), investigates the effect of mortgage debt burden for people aged 55 years and older in terms of repayment risks, well-being and mental health outcomes, superannuation drawdowns as well as the shift in consumption patterns of this population.

Key findings include:

• Older mortgagors’ average mortgage debt to income ratio tripled from 71 per cent to 211 per cent between 1987 and 2015, reflecting a severe increase in repayment risk.
• When older mortgagors face mortgage payment difficulties, males’ SF-36 mental health scores are reduced by around 2 points and females’ by 4 points.
• The budget share devoted to necessities increases as repayment risk rises. In the top MPIR quintile the budget share accounted for by necessities is around 3 per cent higher than in the bottom quintile, holding all other factors constant.
• Due to tenure and demographic change, the demand for Commonwealth Rent Assistance (CRA) is projected to rise by 60 per cent, from 414,000 in 2016 to 664,000 in 2031. The unmet demand for public housing from private renters aged 55+ is expected to rise by 78 per cent—from 200,000 to 440,000 households—between 2016 and 2031.
• In the bottom two mortgage-payment-to-income ratio (MPIR) quintiles the odds of superannuation drawdowns are only around 60 per cent of the odds in the top quintile.